Actively Coping with Trade Risks in Africa

As a result of cold war, poverty, civil strife, ethnic conflicts, religious conflict and power struggles in many African countries, some new hot spots have appeared. We are aware of escalating political tension in Ivory Coast and some Northern African countries like Tunisia, Algeria, Egypt and specially Libya. This interrupted trade exchange between two sides because banks were closed, communication systems were broken, security threats and public disorder intensified, etc.

 

To avoid political risks, enterprises need to keep an open eye on information in the countries they have business with, visit the Ministry of Industry and Trade’s websites like www.ttnn.com.vn, www.moit.gov.vn, www.baocongthuong.com.vn, etc. to update the latest information. In addition, they should reduce business activities with North African countries until the bad situations ease and seek other markets in West Africa and Central Africa. The ministry has recently carried out a cooperative project with the International Francophone Organization (OIF) and the International Trade Centre (ITC) which will organise business delegations to survey markets in West Africa, Central Africa and East Africa and take part in international trade fairs, seminars, business exchanges, etc. These organisations may provide partial fees for Vietnam’s trade promotion activities with Africa. The ministry also is lobbying these organisations to provide information about n African importers and performance guarantee contracts, help Vietnamese enterprises to participate in African procurement bids, etc.

In Africa, the first and foremost risk is payment stage. African companies have low purchasing power and limited solvency. Although the demand in the African market is huge, African enterprises have limited knowledge about financial matters and often recommend deferred payments and CIF delivery. These are major hurdles for Vietnamese exporters.

 

Another risk is trade fraud in West and Central Africa in recent years, fanning concerns of enterprises doing business with this continent.

 

In addition, slowly renovated administration, cumbersome procedures, bureaucracy and underdeveloped air transportation, etc. are also risks and obstacles for trade and business activities of Vietnam enterprises.

For the payment process, the safest solution is to apply confirmed irrevocable L/C. In Africa, there are large international banking operations and has links to some major banks in Vietnam or have branches in Vietnam, including HSBC and Societe Generale. For normal goods, Vietnamese exporters do not need permits and pay export fees to African markets. If fees required (for sensitive products), the responsibility is subjected to importers. They should also avoid sample trap where importers may ask for sample goods, particularly those with high value or large quantity. To seek partners, they can join international trade fairs, market survey delegations, trade promotion groups or introductions by Vietnamese chambers of commerce in other countries.

When doing business with partners in Africa, if a partner is found on the internet, they should check for the legal status by asking for showing establishment license, provide business registration certificates, export cards, etc. Central and West Africa countries speak French, except for Nigeria, Ghana, Liberia, Gambia and Sierra Leon using English. If shown documents are written in English or other languages, they may be falsified.

 

Enterprises can also send these documents to the Africa, West Asia and South Asia Department under the Ministry of Industry and Trade or the Vietnam Trade Office in Africa for verification and assistance.

For beginners without much knowledge about business practices and customer information, choosing an EU intermediate is a good immediate solution.

 

The Ministry of Industry and Trade organised many conferences on African market in many provinces and cities nationwide to introduce this market, import and export regulations, business practices and risk prevention measures. The Vietnam International Arbitration Centre (VIAC) and the Common Court of Justice and Arbitration of Africa (CCJA) signed a cooperation agreement where companies can seek support from these two entities in case of disputes.

 

The ministry will coordinate with ITC and OIF to open two training workshop on risk aversion in doing business in Africa in Hanoi on March 8 and in Ho Chi Minh City on March 16.

 

In 2011, the Ministry also plans to organise a meeting with Vietnamese and African commercial banks in Hanoi. This meeting will allow banks from the two sides to sign cooperation agreements to help enterprises shorten transfer time, reduce costs paid via intermediary banks, and easily apply L/C payment method.

In general, there is no discrimination for Vietnamese enterprises when they do business with European, African, American and Asian markets.

 

However, to support Vietnamese enterprises to boost exports to Africa, in October 2010, the Ministry of Industry and Trade approved a project to promote trade with Africa. This project was another step to carry out the Action Programme of the Ministry of Trade for implementation of the National Action Programme for Vietnam - Africa Trade Promotion in 2004 - 2010 stage in order to raise Vietnam - Africa trade revenue by least 20 percent a year.

 

The project puts forth practical measures to support enterprises to approach information about African markets, market potentials, import demands, present imports, business opportunities and risks alerts. The ministry will assign Vietnamese chambers of commerce to persuade African importers to attend trade fairs, exhibitions and business conferences with Vietnam

To quicken supply of commodities for African countries, the ministry is considering the construction of bonded warehouses for rice in some key markets in this region.